7. Consider the following financial statement for BestCare HMO, a non-profit man

Question

7. Consider the following financial statement for BestCare HMO, a non-profit managed care plan:___________ BestCare HMO Income Statement Year Ended June 30, 2012 (in thousands)_______ REVENUE: Premiums earned $26,682 Coinsurance 1,689 Interest and other income 242 Total Revenue $28,613_____________ EXPENSES: Salaries and benefits $15,154 Medical Supplies and drugs 7,507 Insurance 3,963 Provision for bad debts 19 Depreciation 367 Interest 385 Total Expenses $27,395_______ NETINCOME $1,218____ NET ASSETS, beginning of year $900 NET ASSETS, end of year$2,118_______________________________________________ BestCare HMO Balance Sheet June 30, 2012 ( in thousands)__ ASSETS Cash and cash equivalents $2,737 Net premiums receivable 821 Supplies 387 Total Current Asset $3,945__ Net property and equipment $5,924 Total Assets $9,869___ LIABILITIES and NET ASSETSAccount payable-medical services $2,145 Accrued expenses 929 Notes payable 141____ Current portion of long-term debt 241__ Total current liabilities $3,456__ Long-term debt $4,295__ Total liabilities $7,751__ Net assets (equity) $2,118__ Total liabilities and net assets $9,869_____________________________________ Calculate and interpret the following ratios for Bestcare ( Industry Average____(1) Total margin 3.8%_____(2) Total Asset turnover 2.1____(3)Return on equity 25.5%____(4) Return on assets 8.0%_____(5) Current ratio 1.3_____(6) Days cash on hand 41days____(7) Average collection period 7days_____(8) Debt ratio 69%_____(9) Times interest earned ratio 2.8_______(10) Fixed asset turnover ratio 5.2

Explanation / Answer

Hi, If you like my answer rate me lifesaver first...that way only I can earn points. Thanks (1) Total margin = Net Income/Revenue = 1218/28613 =4.26% (2) Total Asset turnover = Revenue/Assets = 28613/9,869 = 2.9 (3)Return on equity =1218/ 2118 = 57.51% (4) Return on assets = 1218 / 9869 = 12.34% (5) Current ratio = 3,945/ 3,456 = 1.14 Net premiums receivable 821 Supplies 387 (6) days in Inventory = 387*365/(3,963 = 3.65 days in Receivable = 821*365/28619=10.47 days in Payables = 141*365/3963 = 12.98 Days cash on hand =10.47 + 3.65 - 12.98 = 1.14 days (7) Average collection period 7days = 10.47 days (8) Debt ratio = ( 241 + 4,295)/9869 = 0.46 (9) Times interest earned ratio = (1218 - 385)/ 385 = 2.164 (10) Fixed asset turnover ratio =28619/$5,924 (Land) = 4.831

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